Is China’s debt-fuelled economy doomed?

For years it seemed as though China’s massively inflated property bubble would just keep on expanding, seemingly defying the laws of economics, as well as regular warnings of the dire consequences for the economy should it burst. Now that moment may have been reached, as the country’s biggest developer teeters on the brink of bankruptcy.

Evergrande is the biggest debtor in China – and in the world. It owes an estimated US$300 billion to Chinese banks, suppliers and foreign investors, and is struggling to meet interest payments. Some $US84 million of bond interest is due this Thursday, but the company has run out of money. Stock markets across the world are falling as the implications become more clear.

By one estimate Evergrande has taken deposits for more than 1.5 million apartments, bought off-plan, and riot police have been deployed outside the company’s Shenzhen headquarters where angry protesters gathered. ‘Evergrande, give back my money I earned with blood and sweat!’ yelled one who managed to force his way into the lobby.

They were joined by the company’s own employees, some three-quarters of whom stumped up their own money earlier this year to help fund the company’s operations. These